By Tamara E. Holmes
If you're planning a foreign trip, double-check with your credit card issuers to find out how much using your credit and debit cards will cost you: Many have increased their foreign exchange fees. (See charts below) 
If you've used your credit card overseas before, you're probably aware that the convenience generally comes at a cost, as card issuers tack on a foreign exchange fee (sometimes called a currency conversion fee). The amount of this charge varies from card issuer to card issuer, as do the guidelines for determining when this fee will be added on.
"Most people have three or four cards and every card has a different foreign exchange fee," says Charles Leocha, publisher of Tripso, a travel news and commentary Web site. For that reason, it's worth taking the time to find out which cards will add the least to theyour trip's overall cost.
Breaking down the feesVisa and MasterCard, which handle the transactions between the merchant and the bank that issued your card, each charge a 1 percent foreign transaction fee. However, most card issuers that use the Visa and MasterCard payment system add their own fees on top of that. If you have a Bank of America MasterCard, for example, you'll pay the 1 percent MasterCard charges plus an additional 2 percent levied by Bank of America, for a total of 3 percent.
Discover and American Express don't utilize the Visa or MasterCard payment system, but they, too, add their own fees for foreign transactions. Both have raised that fee recently. American Express now charges a 2.7 percent foreign transaction fee, up from 2 percent, while Discover recently started charging cardholders 2 percent after charging no foreign transaction fee for purchases made overseas. If you have a Discover card, it's also important to note that it's not accepted in many countries, so the foreign transaction fee may not even be applicable.
The percentage charged by card issuers varies, but can you avoid the fees completely? You can if you have a Capital One card or some Charles Schwab cards. Both of those issuers waive the fee completely, which can save cardholders a lot of money if they travel frequently, says Linda Sherry, director of national priorities for San Francisco-based advocacy firm Consumer Action.
Cardholders also face a costly change in the definition of the word "foreign." It used to be you were charged a "foreign" fee only when you made a purchase while standing on foreign soil. Now, Visa and MasterCard have both redefined foreign transactions as any purchase that at any point touches a foreign bank. So, for example, you can be sitting at your computer buying a piece of clothing online from a company based in France. If that company uses a French bank to process transactions, Visa and MasterCard charge your card-issuing bank an additional fee. Most large card issuers pass the fees on to their customers.
If your card issuer has been taken over by a bigger bank, the change in ownership also may cost you. Before they were swallowed by bigger banks in 2008, Washington Mutual and Wachovia charged cardholders only the 1 percent MasterCard/Visa fee for foreign transactions. Today, Washington Mutual is owned by Chase and Wachovia by Wells Fargo. Chase and Wells Fargo also pass on to their cardholders the 1 percent MasterCard/Visa foreign transaction fee and both tack on an extra 2 percent fee of their own.
| Most people have three or four cards and every card has a different foreign exchange fee. |
| -- Charles Leocha Tripso publisher |
The cash factor
Not only do you have to pay to use credit, but many banks charge for using debit cards to make purchases and for accessing cash at foreign ATMs. Make sure you find out the cost of each scenario so you can determine whether it makes more sense to use your debit card to make a direct purchase or to use it to make a withdrawal from an ATM and pay with cash instead. For example, Citi charges a 3 percent foreign transaction fee for purchases made with a debit card, while if you are a Citibank user withdrawing funds overseas from a nonCitibank ATM, you'll pay that 3 percent foreign transaction fee along with $1.50 per withdrawal.
Consumer advocates have voiced concerns that the cost of using plastic overseas will go up, as a result of the Credit Card Act of 2009. "Some foresee that fees in general will be a place where banks will look to make up for some of the lost income from their inability to put higher interest rates on accounts," says Sherry. "It has been mentioned that this could be an area that some issuers might add another percentage point."
Others complain that card issuers and banks often don't make this information readily available. In some cases, the foreign transaction fee is not easily found on a card issuer's Web site or on credit card statements, meaning cardholders must call the issuer to even find out what the fee is. "It is a hidden fee in every sense of the word," says Leocha. "They do have it in their fine print, but the normal consumer has no way of knowing if they're being ripped off."
While some argue that the card issuers and banks are being greedy in charging these fees, others point out that the banks are providing consumers with the convenience of being able to make international purchases easily, and convenience is worth a price. In addition, "there's a cost associated with converting currency or doing transactions between two banks that deal with different currencies," says Consumer Action's Sherry. "Banks have that same cost whether the person is overseas presenting the card or the person is buying something over the Internet from a foreign-based company and foreign bank."
The only thing cardholders can really do is find out the fees in advance so they can determine the best cards to use and budget appropriately. Doing otherwise "can get pretty expensive," Leocha adds.
| Credit card foreign transaction fee (updated 6/8/2009) | |||
|---|---|---|---|
| Issuer | Issuer fee | MasterCard/Visa fee | Total fee |
| American Express | 2.7% | n/a | 2.7% |
| Bank of America | 2% | 1% | 3% |
| Barclaycard/Juniper | Between 1% and 2% | 1% | Between 2% and 3% |
| Capital One | none | none | none |
| Citi | 2% | 1% | 3% |
| Discover | 2% | n/a | 2% |
| HSBC* | 2% | 1% | 3% |
| Chase | 2% | 1% | 3% |
| US Bancorp | 2% | 1% | 3% |
| USAA (available only to members of the military and their immediate families) | none | 1% | 1% |
| Wells Fargo | 2% | 1% | 3% |
| Foreign ATM transaction fees | |||
|---|---|---|---|
| Issuer | Foreign ATM cost | ||
| Bank of America | None at Global ATM Alliance ATMs/$5 plus 1 percent currency conversion fee at Non-Global ATM Alliance ATMs | ||
| Citi | Citibank ATMs: $0 plus a 3 percent currency conversion fee/Non-Citibank ATMs: $1.50 plus a 3 percent currency conversion fee | ||
| HSBC | 1 percent for ATM withdrawal | ||
| Chase | $3 plus 3 percent currency conversion fee | ||
| USAA | $0 plus 1 percent currency conversion fee | ||
| Wells Fargo | $5 withdrawal fee | ||
*HSBC's Premier World MasterCard has no foreign transaction fee.
